Monday, 30 March 2009

Despite the fact that Japanese banks largely avoided the financial excesses seen in the United States over the past few years, its economy has been among the hardest hit among developed countries.

February economic data have been pretty horrific.

Last week, the Ministry of Finance reported that exports fell 49.4 percent from the previous year, worse than the 45.7 percent decline in January. Imports fell 43.0 percent in February.

Today, the Ministry of Economy, Trade and Industry reported that industrial production fell 38.4 percent from the previous year in February. From January, industrial production fell 9.4 percent on a seasonally-adjusted basis.

Economic activity in Japan fell off a cliff in the fourth quarter of last year. The dive seems to have continued in the first quarter of this year.

Still, February data have also provided some tentative signs of stabilisation. The Nomura/JMMA Japan Manufacturing Purchasing Managers Index rose to 31.6 in February from a record low of 29.6 in January. The consumer confidence index rose to 26.7 in February from 26.4 in January, the second consecutive rise in the index. The economy watchers survey also showed that the diffusion indices for both current and future conditions rose for the second consecutive month.

Even today's poor industrial production report came with something positive. The survey of production forecast showed that companies expected production to increase 2.9 percent in March and 3.1 percent in April.

So while the latest data may look bad, there is hope that this may turn out to be as bad as it gets, at least in terms of rate of contraction.